Domestic market engine for Brazilian growth

Brazil is one of the most sought-after destinations in the world today for inbound Foreign Direct Investment (FDI) due to the country’s market size, its growing middle class, and the fact that it will host the 2014 FIFA World Cup and 2016 Olympics, according to leading Brazilian investment experts.

Industry veterans Rafael Marchesini and Sidney Alves Costa made this observation while examining Brazil’s powerhouse potential during a talk show hosted by the Capital Club Dubai, the region's premier private business club and a member of the ENSHAA group of companies.

The eye-opening and dynamic discussion on the topic “Brazil Rising: Watching the Bubble or Living the Boom?” was hosted by the Capital Club Dubai in association with United Investment Bank.

Raul Silva, Chief Executive Officer of DIFC-based United Investment Bank said “There is no arguing against Brazil’s potential as a market for investment. The key question is simply how it can be accessed. UIB focus on Brazil is part of our core business strategy, to become a bridge between Gulf investors and emerging markets such as Brazil”.

Sidney Alves Costa, Dubai-based head of Middle Eastern markets for ApexBrasil, the Brazilian Trade and Investment Promotion Agency, said that Brazil has become one of the leading recipients of FDI during the last decade, attracting investments to a variety of sectors.

According to Costa, Brazil received a record US$45.06 billion in FDI in 2008, and the expected FDI in 2010 was projected at US$45 billion. Costa also said that the Latin American giant's robust economic performance can be gauged by the fact that the country’s GDP grew by 7.5 percent in 2010.

Speaking about the strong domestic market, he said that Brazil is poised to become the world’s fifth largest consumer market in the next decade. It has already become the third largest market for cosmetics, cell phones and soft drinks, the fifth largest market for personal computers and automobiles, and the fourth largest manufacturer of automobiles and aircraft.

The fact that Brazil is home to the world’s tenth largest petroleum reserves has only added to financial experts’ confidence that the country will soon become the Latin American superpower.

Highlighting the measures taken during the global financial recession, Costa said that the tax alleviation on durable goods allowed household consumption to be maintained at pre-crisis growth levels.

Rafael Marchesini, Manager of Private Equity Funds Investments at the Brazilian Development Bank (BNDES), the main financing agent for development in Brazil, said that the Brazilian economy is projected to grow beyond five percent per annum over the next five years.

He expressed confidence that the domestic market will make the growth in demand feasible, while investment will be driven by five main sector including Oil & Gas, Electric Energy, Infrastructure, Real Estate and Agribusiness.

However, he agreed that the emerging economic power might face two main challenges – to increase the aggregate GDP/ investment rate, and to make the competitive advance of the manufacturing industry feasible.

Echoing Costa’s opinion, Marchesini said that the domestic market is an engine for Brazilian growth and gave credit to reduced levels of unemployment, an expanding payroll, improvement in income distribution, and growth in credit. Regarding investment opportunities, he said that the oil and gas sector and the domestic market will lead investments in the industry sector, while electric power will lead investments in the infrastructure sector.

Marchesini said that between 2011 and 2014, the electric energy sector will require about US$79 billion in investment, while the hotel services sector will need around US$1.14 billion, and between US$11.4 billion and US$17.1 billion will be needed to expand broadband services.

New stadia – and remodeling of existing ones – will require investments of approximately US$3.6 billion, while hosting the 2016 Olympic Games will require approximately US$7.2 billion in investment.